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    Question

    Calculate the compound interest earned on Rs. 18,000 when

    it is invested at 10% per annum, compounded semi-annually for 1 year.
    A 1,845 Correct Answer Incorrect Answer
    B 1,570 Correct Answer Incorrect Answer
    C 1,915 Correct Answer Incorrect Answer
    D 1,065 Correct Answer Incorrect Answer

    Solution

    ATQ,

    Effective rate = 10/2 = 5%

    Effective time = 2 terms, where each term is 6 months

    So, total amount after 1 year = 18000 × {1 + (5/100)}² = 18000 × (1.05)² =

    18000 × 1.1025 = Rs. 19,845

    Compound interest after 1 year = 19845 – 18000 = Rs. 1,845

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